For homeowners, one of the easiest ways to get extra cash to pay bills, take care of unforeseen emergencies or plan upgrades to their home or personal business is by taking out a mortgage loan. These loans use the equity you have built up in your home as collateral to borrow money from a bank, mortgage company or any other financial institution.
As opposed to personal loans, mortgage loans are easier to get because homes and property have value and are used to secure the loan. If a person defaults on a mortgage loan, the lender can foreclose on the property to get back some of the money that was loaned.
How to borrow against your house
To get the best rate for your second mortgage, you need to have a good credit score and know exactly how much money you want to borrow. Since a second mortgage will be paid back concurrently with the original one, you don’t want to overextend your ability to pay it back.
Once you have determined how much money you need, start looking at who to borrow from. Although going to your original mortgage company is usually the safest way to borrow money against your home equity, it isn’t always the only way or the best way for that matter.
- Make sure your credit score is good. When your credit score is high, even doing business with your current bank or mortgage holder is easier. The higher your score, the more leverage you have with your financial institution.
- Know the current market. Interest rates are a leading indicator of the financial landscape, but they don’t give you valuable information about how a bank or financial institution does business. Do your homework.
- Don’t be afraid to ask questions. You are borrowing money and using your home as collateral, that gives you every reason to want to know about all the aspects of the loan process. Don’t let yourself be bullied into agreements that you do not understand.
- Read the fine print. Everything has a price and most of the ‘hidden’ fees and costs can be found in your contract. Read it, ask questions and don’t sign it until you understand what it says.
All financial institutions are not alike
Although interest rates are a prime consideration in who you refinance through, it should not be your only consideration. Fees, requirements and interest payments also play key roles in deciding who the best lender for you should be.
Communication is also very important. Since most of the communication between you and the finance company will be with a single person, you want to ensure that you can work and communicate clearly with your mortgage loan originator.
In a nutshell, a mortgage loan originator is the person who works with you to complete the loan process. He or she is your main point of contact at your financial institution and will walk you through the entire procedure. Although you will be borrowing money from the bank or mortgage company, the mortgage loan originator is the face of the transaction.
If you are uncomfortable with your mortgage loan originator, you can ask for his/her replacement or go through a different financial institution or bank. It cannot be stressed enough that having a positive relationship with your loan originator can make the entire mortgage process easier.
Although refinancing your mortgage is not your right, you have every reason to want to get the best deal possible while setting the terms of the agreement. In addition to having collateral, your credit rating and credit history should earn you the respect of our financial institution.